Caixin
Jun 06, 2018 07:47 PM
FINANCE

Margin Calls Loom as Prices of Pledged Shares Plunge

Pledging stock to borrow from brokerages was a popular financing approach, but the business has been contracting since regulators upped financial institutions' mandatory risk controls. Photo: IC
Pledging stock to borrow from brokerages was a popular financing approach, but the business has been contracting since regulators upped financial institutions' mandatory risk controls. Photo: IC

Shares of over 10 listed companies have plummeted over recent month to levels that could trigger the forced sale of the stock pledged by their controlling shareholders as collateral.

The situation underscores growing risks in the loan business after regulators tightened their grip on the practice as part of a national deleveraging campaign.

Telecommunications solution provider Boomsense announced in a filing with the Shenzhen bourse Tuesday that some of its stock pledged by its controlling shareholder as collateral for loans has been subjected to margin calls by creditors due to a continued fall in the share price. The problematic shares account for 17.8% of the firm’s total.

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